Fox and Falcon, a well-established bar and restaurant located in South Orange, New Jersey, has filed suit against Connecticut-based Hartford Insurance for failing to pay on the business interruption insurance under its policy. Following NJ Governor Murphy's stay-at-home order on March 2020, Fox and Falcon owners notified Hanover Insurance of its claim for business interruption. Fox and Falcon had paid Hartford Insurance for years for their insurance, waiting for a moment like this when they'd need that money most. The stay-at-home order resulted in the total closure of Fox and Falcon, leaving them without any income. In response to their request, however, Harford Insurance issued a blanket denial without conducting any investigation. In their statement, they claimed that since no physical damage occurred to property, Harford Insurance would not provide coverage.
“Now more than ever when the global coronavirus pandemic is wreaking havoc on US economy, insurance companies are engaging in a public campaign declaring that COVID-19-related claims are not covered without even investigating the claims,” according to John J. Scura III, Esq., attorney for Fox and Falcon.
When Governor Murphy issued his stay-at-home mandate, Fox and Falcon could no longer conduct business. No patrons would come to their establishment given the severe circumstances the residents of Essex County were put into. Essex County has over 15,000 confirmed cases and has suffered over 1,400 deaths. In their policy, Hartford Insurance states “If the necessary suspension of your ‘operations’ produces a Business Income loss payable under this policy, we will pay for the actual loss of Business Income you incur during the period.” COVID-19 has caused physical damage to the immediate area of Fox and Falcon. Not only does this satisfy the conditions as written in the policy, but the Hartford policy also provides for at least $50,000 in coverage in the event of a virus affecting business. However, Hartford Insurance refuses to agree to pay for any of their coverage, despite their policy stating otherwise. Fox and Falcon seeks damages from this alleged breach of contract and a declaratory judgement that the defendants’ policies provide coverage for loss of business income and expenses caused by the shutdown order.
Business interruption policies, such as the policy provided by Hartford Insurance, provide “all risk” insurance coverage. As the name implies, in "all risk" policies all risks are covered unless they are specifically excluded. If the insurance company claims coverage for a pandemic or stay-at-home mandate by the state government is excluded, it is their burden of proof in court to prove that the coverage is excluded in writing from the agreed-upon all risk policy. In order to deny payment for the pandemic, Hartford Insurance would have to find in their policy a section written in their policy excluding damages caused by a pandemic.
All across the country, insurance companies are unfairly denying coverage claims to businesses harmed by this pandemic without conducting proper investigations. They are ignoring their written policy language. The insurance companies denying service claim that the virus is not causing the loss of use or diminished value of property. The virus has not physically altered the property, ergo it will not be considered physical loss of damage, therefore they deny paying for coverage.
Despite their claims the virus did not cause "physical loss or damage," applicable case law holds that the loss of use of property that has not been physically altered constitutes “physical loss or damage” for purposes of first-party property insurance, such as in the event of either a global pandemic or statewide stay at home mandate. Property that has not been physically altered does constitute physical loss or damage for the purposes of an insured business asserting that its policy covers the claim. Unless stated otherwise directly in the signed policy, if business is interrupted by a physical force outside the business’s control, coverage is due.